Biodiesel Poised for Acceleration

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Biodiesel Poised for Acceleration

02/18/2016

AMES, Iowa — Biodiesel could be the next great opportunity for convenience store retailers at the fuel pump.

“Biodiesel production has doubled in just the past six years,” Troy Shoen, senior manager of marketing for Renewable Energy Group, the largest producer of biodiesel, told CSNews Online in an exclusive interview. “Biodiesel will ride the wave of diesel."

The renewable fuel is produced from vegetable oils, animal fats and recycled cooking oil. It can be blended with petroleum diesel fuel in any proportion and can be used in existing diesel engines without modification. When blended with diesel, the resulting fuel sold at the pump carries a “B” designation. For example, B5 means 5 percent of the fuel is biodiesel, with the remainder being diesel. Another popular blend, B20, represents a fuel with 20 percent biodiesel and 80 percent diesel.

In the United States, under the Renewable Volume Obligation of the Renewable Fuel Standard (RFS), 1.73 billion gallons of biodiesel were blended in 2015. The RFS calls for 1.9 billion gallons to be blended this year and then 2 billion gallons in 2017.

Companies can legally blend biodiesel into diesel fuel as much as they wish. In fact, no pump labeling is required for any B5 or lower blend. However, auto warranties only protect a vehicle’s engine up to a B20 blend.

Based in Ames, Renewable Energy Group operates 11 biorefineries that produced 432 million gallons of renewable fuels last year, with a goal to produce 500 billion gallons of renewable fuels this year. The company converts natural fats, oils and greases into advanced biofuels.

As for why consumers like biodiesel, Shoen said the fuel is locally produced, in abundant supply and achieves between 20 percent and 40 percent more miles per gallon than traditional E10 petroleum.

In addition, biodiesel is known to reduce carbon dioxide emissions, with a B20 blend reducing such emissions by 15 percent, according to U.S. government research.

Biodiesel blends also have excellent cleaning properties that can dissolve sediments in the fuel system left by petroleum diesel contaminants, Shoen told CSNews Online.

THE RETAILER BENEFITS

Although no data is available regarding how many gas station operators currently offer biodiesel, only 50 percent of fuel retailers in 2014 sold diesel at the pump. Shoen believes this represents a great opportunity for the convenience and petroleum retailing channel. Especially when considering that to offer biodiesel, retailers don’t need to change their infrastructure dramatically, he noted.

Another advantage in offering biodiesel, he said, is that some states even offer tax incentives for retailers:

Texas — Biodiesel and the biodiesel portion of a blended fuel are exempt from the state's fuel tax. Depending on the biodiesel blend, a c-store retailer can save up to four cents per gallon.

Illinois — A partial sales tax exemption is provided for B1 to B10 blends, while a full exemption of the state’s 6.25-percent sales tax is provided for blends of B11 or more. This means retailers are eligible for up to an 18.75-cent-per-gallon tax exemption on B11 and higher blends.

Iowa — B5 and above blends are eligible for a 4.5-cent-per-gallon tax incentive.

Several engine manufacturers are already on board with biodiesel, including BMW, Cummins, Ford and General Motors, Shoen noted. “All major OEMs [original equipment manufacturers] support the use of B5 and lower,” he added. “Seventy-eight percent of OEMs support blends up to B20.”

In the next nine years, diesel vehicle sales are expected to increase by 349 percent, per U.S. Energy Information Administration data.

“Forty new diesel-powered models were introduced in 2015 alone,” said Shoen. “This number will continue to grow.”